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Most of the state has just one carrier — Blue Cross Blue Shield of North Carolina — offering plans in the exchange. But the central part of the state has more options. Cigna joined the exchange starting in 2017 in five counties in the Raleigh/Durham area (Chatham, Johnston, Nash, Orange, and Wake). Ambetter (Centene) entered the ACA-compliant individual market in Durham and Wake counties in North Carolina for 2019 coverage, and Bright Health began offering plans in the Charlotte and Winston-Salem areas as of 2020.

All three existing insurers dropped their premiums for 2020, and Bright Health joined the exchange

The three insurers that offered 2019 coverage in the North Carolina exchange – Cigna, Ambetter (Centene) and Blue Cross Blue Shield of North Carolina – all proposed average rate decreases for 2020. The final approved rate changes ended up being very similar to what the insurers initially proposed, although Ambetter implemented a more significant rate decrease than they initially filed.

Insurers in North Carolina’s individual market implemented the following average rate changes for 2020:

Blue Cross Blue Shield of North Carolina: An average decrease of 5.5 percent. BCBSNC has the lion’s share of the ACA-compliant individual market in North Carolina, with about 489,000 enrollees in 2019. Blue Cross Blue Shield of North Carolina decreased their premiums by about 4 percent for 2019, so the 2020 rates represent two straight years of declining rates.

Cigna: An average decrease of 4.6 percent. Cigna has 5,806 enrollees in 2019. The premium decrease for 2020 came on the heels of a very slight (0.4 percent) average increase for 2019. Cigna’s plans are available in the Raleigh area, in Chatham, Johnston, Nash, Orange, and Wake counties.

Ambetter: An average decrease of 11.1 percent (Ambetter initially proposed an average decrease of 8.73 percent). Ambetter was new to North Carolina in 2019, with plans available in Durham and Wake counties.

Bright Health: New to North Carolina for 2020, so no applicable rate change. Bright is offering coverage in the Charlotte area and the Winston-Salem area.

The average benchmark plan premium in North Carolina’s exchange is 10 percent lower in 2020 than it was in 2019. But overall average premiums for the three existing insurers only dropped by 5.6 percent. Premium subsidies are based on the cost of the benchmark plan, so average subsidies are smaller for 2020, assuming enrollees’ average incomes remain unchanged.

For example, a 40-year-old in Raleigh who earned $25,000 in 2019 was eligible for a premium subsidy of $329/month. They could choose from among three insurers, and had access to a free bronze plan (after the subsidy was applied), as well as a bronze plan for under $5/month and another for under $13/month.

For 2020, a 40-year-old in Raleigh earning $25,000 is eligible for a subsidy of $282/month (it’s smaller because the benchmark premium is cheaper). There are no longer any free bronze plans available at this income level for this person. Instead, the cheapest plan is $13/month, and there are two others for under $40/month. This is still a bargain, but it’s not quite as much of a bargain as the after-subsidy premiums that were available at the same income level in 2019.

But because the cost of CSR continues to be added to the premiums for silver plans, after-subsidy premiums for bronze and gold plans are still lower than they were in 2017. These low-premium bronze plans are available because the cost of CSR has been added to the premiums for silver plans, which makes the benchmark plan disproportionately expensive, compared with plans at other metal levels. That results in a disproportionately large premium subsidy, which can then be applied to any metal-level plan in the exchange, making some of them nearly free.

A look at North Carolina’s average rate increases since 2014

ACA-compliant plans debuted in 2014, and premiums were essentially insurers’ educated guesses, since they had no claims experience with these plans.

For 2015, PricewaterhouseCoopers LLC determined a weighted average rate increase of 9.8 percent for individual coverage in North Carolina, including on and off-exchange carriers (nine carriers total in NC). This was higher than the national average of 5.4 percent.

The Commonwealth Fund’s analysis of exchange plans in North Carolina came up with an average rate increase of 12 percent for 2015.

Among the 34 states with fully-HHS-run exchange, only four states (Alaska, Indiana, Maine, and Wyoming) had average 2015 premiums for the second-lowest-cost silver plans that were as high or higher than North Carolina’s average.

Goodwin explained that “if [North Carolina] had a state-based system, we would have had more companies competing. There would have been more leverage on my end as the Insurance Commissioner and rates would have been lower. If there had been Medicaid expansion, rates would have been lower.”

United and Aetna exited the exchange at the end of 2016, which exacerbated the increase in the average benchmark (second-lowest-cost silver plan) premium in North Carolina’s exchange for 2017. HHS reported in October that the average benchmark premium in North Carolina would be 40 percent higher than the average benchmark premium in 2016 (for reference, the average benchmark premium increase across all the states that use HealthCare.gov was 22 percent).

Blue Cross Blue Shield of North Carolina raised their premiums by an average of 24.3 percent in 2017, and Cigna raised theirs an average of 15.3 percent (30 percent for bronze plans).

For 2018, Blue Cross Blue Shield of North Carolina increased their premiums by an average of 14.1 percent, while Cigna’s premiums grew by an average of 24.6 percent. As described below, much of that was due to the Trump administration’s decision to stop funding cost-sharing reductions.

The NC legislation essentially mirrors the federal guidelines for association health plans (AHPs) that the Trump administration finalized in 2018, allowing small businesses to join together and obtain large-group health insurance based on either a common industry (eg., numerous small bakeries joining together) or a common geographical area (eg., a group of unrelated small businesses that are all based in the same state). The legislation also calls for allowing sole proprietors to join AHPs, as is the case under the federal guidelines.

In March 2019, a federal judge blocked some provisions of the federal AHP rules, calling the regulations an “end-run around the ACA.” Specifically, the judge overturned the provisions that allow sole proprietors to join AHPs, as well as the provision that allowed unrelated small businesses that share only a geographical location (and not a commonality of interest) to join AHPs. The Trump administration appealed the decision in April, and the case is pending in the U.S. Court of Appeals, DC Circuit.

So S.B.86 also notes that if those provisions in the federal AHP regulations are struck down by the appeals court, North Carolina would “conduct a study on the feasibility of submitting a 1332 waiver request” to CMS in order to seek approval for allowing sole proprietors and unrelated small businesses (that share only a geographical location) to join AHPs.

If sole proprietors and small businesses are ultimately allowed to join together to obtain AHP health coverage that follows large group rules (instead of individual market and small group rules), the health plans issued under those rules are expected to be less expensive, since they could be less generous. There’s no requirement, for example, that large group plans cover essential health benefits. Most current large employers do cover EHBs, but an AHP would have less incentive to do so (compared with large employers, for whom robust employee benefits are a key part of compensation, recruitment, and retention).

North Carolina exchange enrollment peaked in 2016, but enrollment grew from 2019 to 2020

As is the case in most states that use HealthCare.gov, enrollment in North Carolina’s exchange peaked in 2016. But although it declined in 2017, 2018, and 2019, it grew slightly for 2020. Here’s a summary of total enrollment in individual market plans through North Carolina’s exchange during open enrollment each year:

Across all the states that use HealthCare.gov, enrollment declined by about 5 percent in 2017, likely due to uncertainty about the future of the ACA, combined with the Trump Administration’s reduction in advertising and outreach for HealthCare.gov in the final week of open enrollment.

Enrollment dropped again in 2019 in most HealthCare.gov states, thanks in part to the elimination of the federal penalty for being uninsured, as well as the Trump administration’s expansion of short-term plans, which serve as an attractive alternative to ACA-compliant plans for some healthy consumers.

Enrollment dropped again in 2020 in most states that use HealthCare.gov, although North Carolina bucked that trend, with nearly 4,000 additional enrollees for 2020.

Insurer participation in North Carolina’s exchange

In 2014, plans only available through two carriers in North Carolina’s exchange: Blue Cross Blue Shield of North Carolina and Coventry Health Care of the Carolinas (Aetna). But nearly two thirds of the state’s 100 counties had only Blue Cross Blue Shield as an option, because Coventry only offered plans in 39 counties.

United Healthcare joined the individual health insurance exchange in North Carolina in 2015 (United already had a strong market share in North Carolina, outside the exchange), and the three insurers continued to offer plans in the exchange in 2016 as well. BCBSNC plans were available statewide, United’s plans were available in 77 counties, and Aetna’s plans were available in 39 counties (Humana had planned to join the exchange in four counties in the Charlotte and Winston-Salem area, but ended up withdrawing their application in 2015)

UnitedHealthcare exited the individual market entirely in North Carolina at the end of 2016, as was the case in the majority of the states where United offered exchange plans in 2016. Aetna also exited the exchange in North Carolina, along with most of the other states where they were participating in the exchanges.

North Carolina Insurance Commissioner, Wayne Goodwin, expressed his dismay at Aetna’s announcement, saying “I am shocked and disappointed that Aetna and its executives have chosen to abandon their Exchange members. We at NCDOI were in the middle of reviewing Aetna’s rate requests for 2017. Never during the review did the company indicate any concern that the requested rates would not solve. I am angered by the impact Aetna’s decision will have on Tar Heel families and our market.”

But Cigna joined the North Carolina exchange as of 2017, offering exchange plans in five counties in the Raleigh/Durham area. For 2019, Ambetter/Centene joined the North Carolina exchange in Durham and Wake counties. And for 2020, Bright Health is joining the exchange in the Charlotte and Winston-Salem areas.

Virtually all of BCBSNC’s 2018 rate increase was due to Trump Administration’s elimination of CSR funding

The Trump Administration waffled throughout 2017 in terms of whether they’d continue to fund cost-sharing reduction (CSR) payments to insurers, and Congress failed to take action to appropriate funding. Under the ACA, insurers are required to provide more robust coverage to eligible low-income enrollees, and the federal government is supposed to reimburse insurers for the cost. House Republicans sued the Obama Administration in 2014 over the legality of the federal payments to insurers (which weren’t specifically appropriated by Congress), and a judge sided with House Republicans in 2016. The Obama Administration appealed, however, and cost-sharing reduction payments continued to flow to insurers for more than a year.

But President Trump repeatedly threatened to cut off funding for cost-sharing reductions, and in mid-October 2017, he announced that CSR funding would end immediately. By that point, rates were already finalized for 2018, and both North Carolina insurers had already based their premiums on the assumption that federal funding for CSR would not continue in 2018 — a prescient decision, in hindsight.

Blue Cross Blue Shield of North Carolina filed 2018 rates in May 2017, and the filing painted a clear picture of the importance of the CSR issue: Blue Cross Blue Shield of NC proposed a 22.9 percent rate increase, but they noted that 14 percentage points of that rate increase were based on an assumption that cost-sharing reductions (CSRs) wouldn’t be funded in 2018. They said they would re-file lower rates if the federal government were to provide “firm commitment to fully fund CSR payments in 2018 in a timely manner.” Had that commitment been forthcoming — which it wasn’t — the new rate filing would presumably have been in the range of 8.9 percent.

But Blue Cross Blue Shield of North Carolina filed new rates in early August, noting that “the individual market in North Carolina has become less volatile…we got information in June and July that made us confident we could reduce our requested rate increase for 2018” The new rate filing was for an average increase of 14.1 percent. That rate filing was ultimately approved by regulators, and BCBSNC clarified in October that if CSR funding had continued, the average rate increase for 2018 would have been “near zero.”

Cigna also filed rate proposals for 2018, but they had — and continue to have — a much smaller membership in North Carolina, due to their limited coverage area. Their initial rate filing was for an average increase of 32 percent, but a subsequent filing, dated in late July, proposed a rate increase of 24.61 percent. In both cases, the cost of CSR had been added to premiums, as Cigna had based their rate proposal on the assumption that CSR funding would not continue.

So for 2018 coverage, the average approved rate increases for North Carolina were:

Blue Cross Blue Shield of North Carolina: 14.1 percent (502,000 members; coverage available statewide). BCBSNC confirmed that virtually all of their rate increase for 2018 was due to the elimination of federal funding for CSR.

As always, it’s important to note that these premium increases refer to full-price premiums. For people who receive premium subsidies (which included 93 percent of the people who were enrolled through North Carolina’s exchange in 2017), the subsidies grow in order to keep after-subsidy premiums affordable. In 2017, the average BCBSNC premium was $655/month, but for subsidized enrollees, the average after-subsidy premium was just $155/month. People who are eligible for premium subsidies began receiving larger subsidies in 2018 to offset all or most of the rate increase due to CSR defunding, although some enrollees may have had to switch plans in order to get the most value from their premium subsidies. But people who pay full-price for their coverage, which included 7 percent of exchange enrollees in 2017, as well as anyone who has off-exchange coverage in North Carolina, felt the full impact of the premium increases as of January 2018.

50,000 with grandfathered BCBSNC plans needed to transition to ACA-compliant coverage for 2018

Blue Cross Blue Shield of North Carolina announced in August 2017 that they would terminate their remaining grandfathered plans at the end of 2017. The insurer noted that while they initially had 330,000 grandfathered plan members in 2010, enrollment had dropped to 50,000 in 2017. And since nobody was able to join the insurance pool for those plans since the ACA was enacted in 2010, the risk pool got older and sicker — and thus more expensive — over the ensuing seven years.

For perspective, the state approved an average rate increase of 32.5 percent for BCBSNC plans heading into 2016, so the requested rate increase for 2017 (which was approved) was not as steep as it was a year earlier.

In 2014, BCBSNC lost $123 million on their exchange business, and that figure spiked to $282 million in 2015. The carrier filed a lawsuit against the federal government in June 2016, alleging that the government failed to live up to its obligations under the ACA’s risk corridor program.

Several other carriers had already filed similar lawsuits; carriers found out in the fall of 2015 that their payouts would be less than 13 percent of the total amount they were owed under the program. And in September 2016, HHS announced that risk corridor revenues from 2015 would all have to be allocated towards the 2014 shortfall, and that there would be no funding left to cover any of the money that carriers are owed under the program for 2015. The case has reached the Supreme Court, which has agreed to hear it during their fall 2019 term.

Although BCBSNC lost $405 million on ACA-compliant plans in 2014-2015, growth in investment income and Medicare Advantage during 2015 offset the losses in the exchange market, giving BCBSNC net earnings of $500,000 in 2015, as opposed to a $51 million loss in 2014 (Wendell Potter recently detailed how carriers can be losing money in the exchanges but still doing well overall). And BCBSNC’s ACA-compliant market losses were much smaller ($38 million) in 2016.

Hands-off approach from state leaders

While the federal government is running the marketplace in North Carolina via Healthcare.gov, the state department of insurance reviews the rates proposed by insurers who want to sell policies in North Carolina through the federal exchange. Much to the dismay of state Insurance Commissioner Wayne Goodwin, this is the only involvement that the state has with the exchange.

North Carolina has also continued to reject federal funds to expand Medicaid. There are an estimated 215,000 North Carolina residents in the coverage gap (ineligible for Medicaid, and also ineligible for premium subsidies in the exchange) due to the state’s decision to reject Medicaid expansion.

Support for the ACA in North Carolina is relatively low, no doubt a result of the clear opposition to the law voiced by the state’s leaders. The state is not doing any marketing or outreach to explain the insurance marketplace to state residents. Instead, the federal government and insurers themselves have taken on that responsibility. Blue Cross and Blue Shield of North Carolina dominates the individual insurance market in the state, and the organization took a lead role in promoting the marketplace from the beginning. Its outreach efforts include operating retail stores and taking a trailer to fairs, farmers markets, and other community events across the state.

North Carolina’s legal aid program has also been very instrumental in getting people enrolled, and has established a phone number (855-733-3711) where residents can call to get help with their insurance questions.

Exchange history and legislation

North Carolina’s path towards ACA implementation was a complicated one that covered all bases. The state took official actions toward each one of the options for a health insurance marketplace: state-run, partnership, and federally operated. In June 2011, North Carolina passed a law stating an “intention” to develop a state-run health insurance exchange.

The House at one point authorized a state-run exchange, but the Senate did not. Outgoing Gov. Bev Perdue announced in November 2012 that the state would partner with the federal government to run the marketplace. Finally, new Gov. Pat McCrory announced in February 2013 that North Carolina would default to the federal marketplace.